Banks Continue to Hike Rates, Fees

Based on a survey of the ten largest banks in the ten largest markets, Bankrate.com found that credit card interest rates continue to climb. Overall, the survey found that the average APR of variable interest rate cards rose from 10.70% to 10.78%. The segment that experienced the highest rate increase was low-interest rate credit cards, which saw average APRs rise to 11.70%, up from 11.62% last week. This hike represents the largest weekly increase in over two months.

More Fees Ahead
In addition, issuers are increasing many other fees. Effective June 1, Bank of America is amending all existing agreements to assess a 4% transaction fee (with a $10 min) on anything not classified as a purchase. This includes ATM cash advances, balance transfers, bank cash advances, cash equivalents, check cash advances, direct deposit cash advances and wire transfer purchases. On top of this, BofA is expanding its definition of “Foreign Transactions” so that any transactions that are made or processed outside of the United States are also assessed a Foreign Transaction Fee, which is currently 3%.

No Legislative Relief in Sight
Many consumer advocates see this wave of rate and fee hikes as an attempt by banks to preempt the ramifications of the rules announced by the Federal Reserve set to take effect in July 2010. In light of these recent increases, a few legislative changes have been proposed by Congress, including an emergency rate freeze on credit cards and an amendment to the now-delayed Credit Card Holders’ Bill of Rights that would cap credit card interest rates at 18 percent. Neither of these changes, however, are likely to see the light of day.